The Association of Financial Advisers has called the Hayne commission’s call to ban grandfathered commissions “inevitable” despite having long argued for a more sensible consideration of the issue.
The Hayne commission final report recommended that grandfathered commissions be banned as soon as practicable and set an end date of 1 January 2021, which was then subsequently supported by the government.
In a note sent to members on Tuesday, AFA chief executive Philip Kewin said the professional body is “very conscious” that a number of its members will have recently purchased businesses and client books that included grandfathered commission clients and that, as a result, will be particularly disadvantaged by the proposal.
Mr Kewin then asked for information from members to assist them on advocacy on the issue.
"We have long argued for a more sensible consideration of this issue, however a recommendation to ban grandfathered commissions had become inevitable," he said.
“We believe that this 1 January 2021 time frame is problematic, particularly in the context that the end of 2020 is also the deadline for advisers to pass the FASEA exam.
“The royal commission report has disputed the issue of this being a breach of the constitution, through the acquisition of property rights on other than just terms, which is an issue that we will address as part of the consultation.”
The AFA also remarked on the Hayne commission’s recommendation that all clients should be on an annual opt-in, where the adviser is required to put in writing every year the services to be provided in the next year and the total fees to be charged.
In addition, product providers are to receive express written authority from clients before the client pays any fees.
“There is no indication of time frame at this stage. We assume that this does not apply to risk-only clients,” Mr Kewin said.
“This new measure will certainly drive up the cost of providing advice and make it less economical to provide services to clients with reduced capacity to pay fees.”
Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.
You can contact him on [email protected].
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